During the current tax year, Charlie Corporation generated gross income of $1,800,000 and had ordinary and necessary deductions of $1,300,000, resulting in taxable income of $500,000. If Charlie Corporation paid qualifying dividends of $200,000 to shareholders, all of whom are in the 24% marginal tax bracket, what is the total tax paid on both corporate income and the corporate dividends?
What will be an ideal response?
Corporate taxable income is $1,800,000 - $1,300,000 = $500,000. Dividends are not tax deductible.
Corporate tax: ($500,000 × .21) = $105,000
Shareholder tax on qualifying dividends: ($200,000 × .15 maximum rate on qualifying dividends for taxpayers in 24% marginal tax bracket) = $30,000
Total Tax: $105,000 + $30,000 = $135,000
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What will be an ideal response?
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